Unfair Terms Control in England and Italy 65

Finally, all the techniques of interpretation of the contract could have allowed some form of manipulation of the contract in order to balance the content of the obligations of the parties, to interfere with the economic arrangements made by them, and to improve the position of the weak party.

DIFFERENT METHODS OF ADJUDICATION

Theories and models of contract (ie principles and concepts relating to contract law, such as the principle of freedom of contract) have a fundamental importance in that they constitute the primary instrument of legal discourse: the actual legal material (ie legislation and case-law) is meaningless and fragmented unless it is shaped, arranged and systematised by the legal doctrine along the lines of certain principles, concepts and models relating to a certain area or sub-area. On the other hand, the choice of the principles, concepts and models which are deemed to become the guidelines for systematisation has its roots outside the law, in the field of the moral and social values of a given society. Accordingly, a contract theory, with its models, concepts and principles, plays a key role in a legal system since it can be considered as the door through which the legal material and the society are connected; in other words, the legal material relating to the area ‘contract law’ is systematised by the legal doctrine in accordance with certain principles and concepts, that is, to a certain type of contract model which is in itself related to wider social and moral principles and ideologies.

In both Italy and England the prevailing contract model according to which legal doctrine shaped and arranged the legal material was for a long time based on the ideology and values of the past century (ie laissez-faire and freedom of contract).

In England, the awareness of new needs and realities, however, triggered the judicial development of remedies and rules which, while still being based on the traditional models and principles (eg freedom of contract), aimed to give an adequate response to the new social and economic framework: in other words, if on the one hand the available remedies based on the traditional model of contract were pushed to their limits, on the other hand fairness, social equality and rebalancing of the bargain did not become the dominant paradigms and underlying principles of contract law: the legal principles and models of the past century remained unchanged, acting as brakes on legal change. In other words, England did not adopt a more general doctrine of ‘contract fairness’ or ‘contractual balance’, or ‘good faith’; rather, it preferred to give individual solutions to deserving cases through the formal rules of incorporation and interpretation, applied with reference to the criterion of ‘reasonable expectation’, trimmed in accordance with parties’ bargaining position. The adoption of Unfair Contract Terms Act 1977 marked a real change against the ‘hands-off’ approach of courts to contracts, providing them with a new contract theory and, as a consequence, with open tools for re-arranging the contractual agreement, in some cases opening the way to a

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‘bifurcation’ of contract law, ‘one for the consumer and the other one for the commercial sector’.92

In the pre-UCTA and UCTA case-law one can identify two methods of adjudication. One method is based on the ‘reasonable expectations’ of the customer as a yardstick to determine the reasonableness of a term, or whether it is incorporated into a contract, or how it has to be interpreted: as earlier discussed, if terms are usual and within the ‘general expectations’ of the offeree they will be deemed to have been incorporated in the contract; the decisive test for interpretation is often based on what an ordinary person in the position of the customer would have thought the effect of a clause to be; most of the ‘abstract criteria’ earlier identified in the context of UCTA are also based on the concept of ‘reasonable expectations’ as they often entail taking into account whether a certain term is in common use in a certain trade, whether insurance is usually taken up in business sector at issue, whether a term operates capriciously (hence unexpectedly), whether compliance with a certain requirement is generally practicable for the customer.

The other method entails an assessment of the fairness of contract terms that depends on the specific circumstances surrounding the conclusion of the contract. These are the criteria which have earlier been identified with reference to UCTA as ‘contextual guidelines’, that is, those that involve the analysis of the specific contract signed by the specific parties to the contract subject to judicial dispute; this method of adjudication also explains the existence, in the pre-UCTA case-law, of cases such as AEG Ltd v Logic Resources Ltd where, although the term at issue was not unusual and could therefore be ‘reasonably expected’, it was still considered as unfair; or Hollier v Rambler Motors, where one would find it difficult to believe that the ordinary customer would not have expected that the exemption clause covers negligence.

That existence of a contextual method of adjudication is confirmed (and, in this specific case, criticised) by Beale93 in a comment to Phillips Products Ltd v Hyland:94 while the Court of Appeal stressed that the question in the case was not whether the clause at issue was fair in other similar contracts, but in relation to the particular contract at issue, Beale suggested that such an approach was mistaken: while individual circumstances could be taken into account in rendering negative any unreasonableness,95 the normal question should be ‘whether the clause is a fair one for the normal run of contracts rather than for the individual customer’.

A contextual method of adjudication may occasionally entail shifting the focus of the reasonableness test under UCTA from the moment of incorporation of a clause (ie whether the clause is a reasonable one to incorporate) to the moment of

92R Brownsword, ‘The Two Laws of Contract’ (1981) SJ 279. In favour of a special lex mercatoria for the business-to-business contracts see, recently, A Schwartz and R Scott, ‘Contract Theory and the Limits of Contract’ (2003) 113 Yale Law Journal 2.

93H Beale, Unfair Contract in Britain and Europe (1989) Current Legal Problems 208.

94[1987] 2 All ER 620.

95Eg, the absence of bargaining power or choice would not necessarily count against a clause, if the customer was important enough to have choice but did not exercise it: this would actually be an argument in favour of the clause.

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reliance (ie whether the clause is a reasonable one to rely upon). In Rees-Hough Ltd v Redland Reinforced Plastics Ltd,96 for example, the decision against the reasonableness of certain terms was also dictated by the fact that the defendants had never sought to rely upon them in his past dealing with the plaintiff: this estopped them from relying on such terms in the case at issue. The essence of the estoppel argument is that the proferens has not previously relied on the protective term, which sends out the signal that the term will not be relied upon: accordingly, it would not be fair to rely on the clause. The relevant question to be asked under UCTA, however, is whether the term at issue is a fair and reasonable one to be included in the contract, not to be relied upon. The point had been discussed during the drafting of UCTA between the English Law Commission (supporting a reliance-based test) and the Scottish Law Commission (supporting an inclusionbased test). The view of the latter prevailed since it appeared to make it easier for the parties to ascertain in advance the range of the obligations they undertook: a contracting party must be in a position to assess its risks before he enters into the contract. The test of reasonableness, referred to the moment of incorporation, had the advantage of placing judges behind a veil of ignorance concerning postformation circumstances, with the result of increasing commercial calculability and security:97 however, judicial response appears not to have always respected the choice of the legislator.

‘Contextual justice’ is, to some extent, a natural result of the inductive nature of the common law legal reasoning: as opposed to the civil law reasoning, which is based on abstract normative propositions, the common lawyer ‘commence à partir du particulier, d’où l’obsession anglaise des faits’:98 accordingly, the circumstances surrounding the conclusion of a certain contract act as structuring elements of legal reasoning more than they do in civil law thinking. Second, familiarity with ‘personalised’ justice is certainly stronger in England than in any civil law system, given that England has for centuries accepted equity as a source of law: accordingly, tailor-made, rather than ‘standard’ solutions are more easily accepted in English courts.

Compared to the English system, Italian law on unfair terms presents differ- ent—almost opposite—features. First, ‘the existence of specific rules about general conditions of contract has brokered the constructive contribution of Italian courts, which limited themselves to the pure application of the articles specifically dedicated to the point’.99 Wherever the poor cover provided by articles 1341–42cc applies, judges (and practitioners alike) refrain from resorting to more general principles like that of good faith, thus showing a sort of unspoken mistrust for

96(1985) 1 Cons LJ 67.

97Adams and Brownsword, ‘The Unfair Contract Terms Act’ above n 65, at 118–19.

98G Samuel, ‘Entre les mots et les choses: les raisonnements et les méthodes en tant que sources du droit’ (1995) Revue Internationale de Droit Comparé, 512.

99R De Negri ‘Report on the practical implementation of Directive 93/13/EEC in Italy’ in The Unfair Terms Directive, Five YearsOn (Luxembourg, Office for Official Publications of the European Communities, 2000) 304.

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such ambiguous clauses, and in the strictest respect of the principle lex specialis derogat legis generalis. In addition, in examining the relevant case-law one cannot avoid noticing that most of the actions involving articles 1341–42cc are also based on other grounds: matters concerning those provisions seem to be considered as ‘ancillary’ and never dealt with great attention, as if they could support only marginally the plaintiff’s (or defendant’s) claim.

Second—and more importantly—the legal material developed by courts has always adhered rather faithfully to the classical principles and to the ‘neutral’ model of contract, the only attempts at change being embedded in a few obscure decisions of first instance courts. This may probably be explained by the wish to preserve the coherence of the private law system but above all by the habit of considering law, especially private law, as a closed system, relegated outside the political, social and economical realities. The problem of unfair terms is a social problem, and the Italian private lawyer has traditionally considered social problems as outside his competence, thus restraining his field of action strictly to the data provided by positive law, and avoiding, in accordance with the kelsenian approach, any contamination of his judgments by ‘metalegal’ considerations:100

the attitude is that the law is a self-contained discipline or phenomenon that can be understood and perfected by systematic study. It is summed up in the phrase legal science, which carries with it the assumption that the study of law is a science, in the same way as the study of other natural phenomena—say those of biology of physics—is a science . . .

The theoretical structure of legal science consists of general concepts and institutions of a high order of abstraction, arranged and interrelated in a systematic way. The components . . . of the structure are strictly legal, and indeed it is believed that their purity, and hence their validity, would be destroyed by the introduction of non-legal elements.101

Another reason for the mistrust of lawyers in any form of substantive control of condizioni generali di contratto can be found in the concern not to threaten any further the principle of contract freedom. This principle already appeared to be reduced by the prohibitions contained in the Italian civil code and by the automatic insertion of clausole imperative (art 1339 cc). While it would be possible, however, to admit that the legislator can bring limitations to private autonomy, the idea that such an autonomy may be subject to a judicial or administrative power entitled to assess parties’ choices is unacceptable to many; for those who see in freedom of contract a constitutional value, the idea of such a control may even raise a suspicion of unconstitutionality.

100M Bianca ‘Le tecniche di controllo delle clausole vessatorie’in M Bianca and G Alpa (eds) Le clausole abusive nei contratti stipulati con i consumatori (Padova, Cedam, 1996) 357.

101M Cappelletti, The Italian Legal System. An Introduction (Stanford, Stanford University Press, 1967), 1970–71.